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Tuesday, 11 June 13
COAL: NO SIGN OF RECOVERY - GABRIELLA
 COALspot.com: We attended the 19th Annual Coaltrans Asia Conference, where we found most of the speakers were not very optimistic on the outlook for coal mining in the months ahead. The main concern is abundant supply outreaching demand growth.
We maintain an UNDERWEIGHT recommendation on the sector.
However, for investors still seeking some exposure to the coal mining sector, PTBA is a solid defensive play given:
1) its low cost structure and defensive earnings,
2) its abundant reserves supporting strong production growth and
3) its strong balance sheet. Going forward, we foresee further declines in EPS due to continued depressed coal prices which will result in lower Target Prices from current levels. Below are some key takeaways:
Coal Mining Conditions in Indonesia as the biggest exporter
As of May 2013, Indonesia’s coal resources amounted to 159bn tons with coal reserves of 32bn tons – about 3% of the world’s coal reserves. Presently, there are 76 Coal Agreements (PKP2B) and 3,892 coal licenses (IUP). Most of them are for operations in Kalimantan and Sumatra. The majority are in Kalimantan which has 61 PKP2B (80%) and 2,670 IUP (69%). All in all, Kalimantan accounts for around 90% of the total national coal production. Most of the IUP (around 80%) are at the exploration stage with the rest in the production stage. There are problems with around 400 IUP. Most of the coal production is undertaken by coal agreement holders and SOE (which account for around 70% of the national coal production).
Fuelling Indonesia’s domestic coal demand: an additional 55GW of power generation capacity
Indonesia’s electricity demand growth is still high (9.4% per year), with PLN, the state electricity company as the biggest coal buyer in Indonesia (66mn tons in 2013). PLN has stated that electricity supply in Indonesia will continue to rely on coal fired power plants (CFPP) for at least the next 10 years given the relatively cheap production costs involved. By 2020, PLN expects total additional power generation capacity to reach 55GW (PLN: 31GW, IPP: 24GW). Of this amount, 35GW or 65% is expected to come from coal power plants translating into additional coal demand of around 100mn tons p.a.
China’s Coal Import Restrictions: 50mn tons from Indonesia
From 2010 to 2012, China’s thermal coal imports increased each year, more than doubling from 71mn tons to 155mn tons, with Indonesia’s thermal coal amounting to 54% of the total in 2012. This year, China is expected to import 380mn tons of coal in total (+31% or half last year’s growth rate). One of the hot issues being discussed was China’s coal import restrictions stipulating: 1) a minimum CV of 3,750kcal/kg (NAR), 2) maximum sulphur content of 2% and 3) maximum ash content of 25%. Around 30% of China’s steam coal imports - or about 50mn tons coming from Indonesia - were lignite. India would benefit from China implementing an imports ban as it would mean lower prices. In 1Q13, however, China’s coal imports still showed an increase of 30% yoy.
Future of Indonesia’s low rank coal
The government seeks a greater role for domestic coal, especially in LRC (mine mouth power plants, gasification, liquefaction). Indonesia has abundant low rank coal resources, accounting for 40% of Indonesia’s total resources, with medium and high rank coal accounting for about 50% and 10%, respectively. There is a need to foster greater international cooperation to develop the technology for the utilization of low rank coal for domestic needs by implementing Clean Coal Technologies with build operate transfer schemes (BOT schemes) to improve calorific value and efficiency.
A Challenging Outlook
The outlook for coal mining will remain challenging, in our view, given the currently depressed coal prices (down 5% average YTD) and persistent global economic headwinds. China and India combined account for more than 30% of the world’s seaborne import volume. Their dominance is expected to continue with potential growth seen in India. Environmental and Regulatory issues will limit coal imports growth, however, as reflected in China’s draft proposal for a ban on imports and the current development of Hydropower and Nuclear generation.
Adding to the woes, Indonesia’s new draft regulation (increasing coal royalties, export quotas) has worsened the investment climate for coal producers in the country.
The author of this article Ms. Maureen Natasha, an equity analyst in PT Danareksa Sekuritas. Danareksa is a pioneering Indonesian financial institution and was the first to introduce mutual funds in Indonesia. It was also the first to launch a US Dollar-denominated fixed-income fund and promote syariah-based investments. Today, Danareksa is the only local company to offer direct market access services to clients worldwide and has grown to become the company that has underwritten the most equity and debt placements in Indonesia.
Views and opinions / conclusion expressed herein are personal views of the author and not that of COALspot.com. This article is subject to disclaimer terms of PT. Danareksa Sekuritas.
If you believe an article violates your rights or the rights of others, please contact us.
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Sunday, 07 July 13
COAL PRICES REMAIN UNDER PRESSURE
COALspot.com – Coal swaps for the year 2014 indicate that, the pressure on coal prices will continue at least until next year. Ave ...
Friday, 05 July 13
THE DRY BULK MARKET IS GOING FROM STRENGTH TO STRENGTH - INTERMODAL
The Capesize sector has been one that has gone through a wild rollercoaster of emotions this past decade, ranging from the exuberance witnessed duri ...
Thursday, 04 July 13
CHALLENGER SIGNS FORMAL EXCLUSIVE MINING AND MARKETING AGREEMENT FOR ABBR PROJECT IN CENTRAL KALIMANTAN
COALspot.com - Challenger Deep Resources Corp., through its subsidiary PT Bestindo Energy has signed the formal exclusive Mining and Marketing agree ...
Thursday, 04 July 13
ASX LISTED QBL TO ACQUIRE INTERESTS IN MOZAMBIQUE COAL EXPLORATION LICENSES
- QBL to acquire interests in two Mozambique exploration licences prospective for coal
- Licenses located in the highly prospective Zambezi basin, ...
Thursday, 04 July 13
HANDY : INDO/CHINA, CHARTERERS RATING AROUND US$ 10,000 - FEARNLEYS AS
Handy
The Feast market firmed slightly up as mid-July cargos entered the market, but charterers seems not in hurry to cover them and looking for ch ...
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- Aboitiz Power Corporation - Philippines
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Georgia Ports Authority, United States
- Bukit Asam (Persero) Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Tamil Nadu electricity Board
- PowerSource Philippines DevCo
- Minerals Council of Australia
- Miang Besar Coal Terminal - Indonesia
- Meenaskhi Energy Private Limited - India
- New Zealand Coal & Carbon
- Gujarat Sidhee Cement - India
- Indonesian Coal Mining Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Cigading International Bulk Terminal - Indonesia
- Central Java Power - Indonesia
- The University of Queensland
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- India Bulls Power Limited - India
- Therma Luzon, Inc, Philippines
- SMG Consultants - Indonesia
- Altura Mining Limited, Indonesia
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- Pendopo Energi Batubara - Indonesia
- Siam City Cement PLC, Thailand
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Iligan Light & Power Inc, Philippines
- Eastern Energy - Thailand
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Maheswari Brothers Coal Limited - India
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Sakthi Sugars Limited - India
- Agrawal Coal Company - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Essar Steel Hazira Ltd - India
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- SMC Global Power, Philippines
- Bhoruka Overseas - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Commonwealth Bank - Australia
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- London Commodity Brokers - England
- Coalindo Energy - Indonesia
- Electricity Generating Authority of Thailand
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- South Luzon Thermal Energy Corporation
- Madhucon Powers Ltd - India
- Wilmar Investment Holdings
- Independent Power Producers Association of India
- Antam Resourcindo - Indonesia
- VISA Power Limited - India
- Binh Thuan Hamico - Vietnam
- Baramulti Group, Indonesia
- Economic Council, Georgia
- Chamber of Mines of South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Latin American Coal - Colombia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Central Electricity Authority - India
- European Bulk Services B.V. - Netherlands
- Eastern Coal Council - USA
- Carbofer General Trading SA - India
- MS Steel International - UAE
- Kobexindo Tractors - Indoneisa
- Kalimantan Lumbung Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Vedanta Resources Plc - India
- Siam City Cement - Thailand
- Metalloyd Limited - United Kingdom
- ICICI Bank Limited - India
- Vizag Seaport Private Limited - India
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- TeaM Sual Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Indika Energy - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Attock Cement Pakistan Limited
- Manunggal Multi Energi - Indonesia
- Orica Mining Services - Indonesia
- Merrill Lynch Commodities Europe
- Kaltim Prima Coal - Indonesia
- Planning Commission, India
- Intertek Mineral Services - Indonesia
- Parliament of New Zealand
- Coal and Oil Company - UAE
- Petron Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Mercator Lines Limited - India
- Kartika Selabumi Mining - Indonesia
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- AsiaOL BioFuels Corp., Philippines
- Bhatia International Limited - India
- Oldendorff Carriers - Singapore
- Trasteel International SA, Italy
- Formosa Plastics Group - Taiwan
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- Grasim Industreis Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- McConnell Dowell - Australia
- Jaiprakash Power Ventures ltd
- IHS Mccloskey Coal Group - USA
- Meralco Power Generation, Philippines
- Medco Energi Mining Internasional
- Bhushan Steel Limited - India
- Electricity Authority, New Zealand
- Marubeni Corporation - India
- PetroVietnam Power Coal Import and Supply Company
- Coastal Gujarat Power Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Thai Mozambique Logistica
- Indian Energy Exchange, India
- Port Waratah Coal Services - Australia
- Leighton Contractors Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- Mjunction Services Limited - India
- Heidelberg Cement - Germany
- Posco Energy - South Korea
- Edison Trading Spa - Italy
- Barasentosa Lestari - Indonesia
- Makarim & Taira - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Kideco Jaya Agung - Indonesia
- IEA Clean Coal Centre - UK
- Energy Link Ltd, New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Videocon Industries ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- Deloitte Consulting - India
- PNOC Exploration Corporation - Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Directorate General of MIneral and Coal - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bayan Resources Tbk. - Indonesia
- Kepco SPC Power Corporation, Philippines
- CNBM International Corporation - China
- Renaissance Capital - South Africa
- Neyveli Lignite Corporation Ltd, - India
- Romanian Commodities Exchange
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sical Logistics Limited - India
- Gujarat Electricity Regulatory Commission - India
- Malabar Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Tata Chemicals Ltd - India
- Larsen & Toubro Limited - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Transport, Egypt
- Sojitz Corporation - Japan
- Jindal Steel & Power Ltd - India
- Straits Asia Resources Limited - Singapore
- Parry Sugars Refinery, India
- TNB Fuel Sdn Bhd - Malaysia
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- Global Business Power Corporation, Philippines
- Standard Chartered Bank - UAE
- GN Power Mariveles Coal Plant, Philippines
- GMR Energy Limited - India
- Star Paper Mills Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- PTC India Limited - India
- Interocean Group of Companies - India
- Simpson Spence & Young - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Dalmia Cement Bharat India
- Cement Manufacturers Association - India
- GAC Shipping (India) Pvt Ltd
- Bulk Trading Sa - Switzerland
- Price Waterhouse Coopers - Russia
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Xindia Steels Limited - India
- Ministry of Mines - Canada
- Energy Development Corp, Philippines
- Directorate Of Revenue Intelligence - India
- Indian Oil Corporation Limited
- Kumho Petrochemical, South Korea
- Singapore Mercantile Exchange
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